There has been a lot of talk recently about payday loan regulations’ restrictions and the absence of alternatives. However, it does not seem to be the case any more. It looks like that some companies as well as certain non-governmental organizations are trying put their foot into the issue.
Payday loans are notorious for their high interest rates; however, in accordance with the results of study carried out by Pew Research Centre, they are quite popular – 5% of all borrowers tried this credit option at least once. Such figures serve at the very least as an indicator of being in demand.
To some extent they represent (and this is the major and the most ponderable argument from the proponent side) the only credit option that is frequently available to low-income families with little chances of being approved by a bank.
And taking into consideration that payday loan stores outnumber fast food chain restaurants (in accordance to some data) – there is no surprise people are challenged to use them; and the state tries to protect (though, usually without any alternative plan to offer).
However, it looks like at least some initiatives are starting to emerge. Surely, they appear mostly as the result of rivalry and certain marketing competition in the conditions recent economic growth. Thus, we now have an alternative to payday loans; actually, a few.
One of them is TrueConnect payroll deduction loans. This type of credit is introduced by the collaboration of St. Paul-based Sunrise Banks with California company’s proprietary software. The program allows employers to take out 12-month loans that are repaid through payroll deductions.
Another option is LendUp. This project represents a start-up that aims to challenge payday loan provides. In fact, they offer a variation of options such as financial education, credit history improvement possibility, and so on. They also offer low-cost instalment loans.
One more option that can be used by either potential borrowers, or the ones that have already entered the repayment circle and for some reason it takes longer than was planned. Faith-based organizations are trying to become a part of this market, either.
Exodus Lending at Holy Trinity Lutheran Church in south Minneapolis can serve as such an example. The church offers repayment of debts of a borrower once and for all; borrowers, in their turn, are allowed to make monthly installments over the following 12 months. There is no interest rate charged in case of such repayment.
Surely, such communities are unable to help in a massive way; however, the number of 86 families that used the alternative is very good. In other circumstances all these people would have nowhere to go.
Yet again, despite the fact of some alternatives appearing, they are insufficient both in number and in ability to cover the needs of all existing borrowers. There is a chance that they will multiply – in the conditions of all the more restrictive environment for payday loans – that would be only a logical development of small cash loan market.